10/21/2015

Couture Insurance

A few weeks ago Forbes posted an article online about AIG Private Client Group is now offering its HNWI clients specialized insurance for designer clothing and luxury accessories such as shoes and handbags. AIG considers the couture collection passion investments and covers damage from mold, floods, and moths as well as in house collection management specialist to asses risk and recommend storage options and coverage.

The article does not address valuation or appraisals of couture collections, but I hope that is next in the process as opposed to sales receipts. As we know some vintage Birkin bags can be very expensive.

Forbes reports

For many people in New York City, the odds of owning expensive handbags and shoes are much higher than owning a car. Yet, with some of the most sought-after handbags costing as much as an average automobile, there was still no specific insurance to cover them. Recognizing this gap in the market, AIG Private Client Group (a division of American International Group AIG +0.00%, Inc. NYSE: AIG) launched a more specialized insurance solution for couture and designer wearable collections for its high net worth policyholders earlier this month.

Here’s how this works: Your items would be individually scheduled on the policy with the option to use blanket coverage for less expensive items. These wearable collections could be anything from couture and ready-to-wear garments, shoes, handbags, to vintage and historic clothing. The usual culprits you could cover with this insurance include floods, moths, and molds that are typically excluded from a homeowners policy. What’s more, it covers custom, work-in-progress couture and shoes, reimbursement for expenses for clients who protect their couture items by removing them from their homes in advance, as well as dry cleaning and wardrobe preparation expenses following a covered loss.

According to Ron Fiamma, Vice President and Global Head of Private Collections for AIG Private Client Group, many of these clients’ wardrobe collections are “investments of passion.” Therefore, in order to safeguard their items effectively, AIG worked with experts at wardrobe storage and preservation service Garde Robe Online, LLC to create a more comprehensive solution. For example, there are in-house collection management specialists available for services such as vulnerability assessments, emergency planning, and referrals to wardrobe preservation specialists.

Knowing a fair share of shopaholics who would use any excuse to buy expensive handbags and shoes, I understand the concept of this “passionate” pursuit all too well. Perhaps it’s the size or the implications of the product, but it somehow seems easier to splurge on an expensive handbag than it is to lavish on art or furniture. Before you know it, the value of your closet could easily rival a down payment of a small apartment (depending on where you are of course). So how does this policy cover those hidden rare, vintage and one-of-a-kind pieces, which have over the years become damaged beyond repair?

Obviously, the policy would cover the repair cost of a damaged item, according to the insurance expert. But if there is still lost value after all the repair work is done, “there’s a unique feature in this coverage that’s similar to what you can find in Fine Art policies, and it would compensate the client for that lost value as well,” he said.

As a constant worrier, I’m already hyper aware of different scenarios that could ruin my prized possessions. Talking to Fiamma did not help, as he easily told me more. Some of the most unexpected causes for damages “include water damage and resulting mold caused by burst pipes in walls, ceilings and from appliances,” he noted. This makes me wonder: If there are so many threats for these expensive wardrobe collections, why didn’t this solution come sooner? Is this policy a result of growing demand or was there an “a-ha” moment that led to its realization?

“It was a bit of both,” noted Fiamma. Over the years, the company has received clients’ feedback about the need for a fashion insurance policy. The moment came when “one of our insurance agents saw 150 Hermès Birkin handbags in a client’s wardrobe,” he said, and it made the insurance company recognize how such a couture policy is absolutely necessary.

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The Appraiser Workshops blog was developed in 2008 to publish news connected with the personal property profession and to promote the Appraiser Workshops. Content includes appraisal ideas and tips, industry news and events, market trends and updates, surveys, educational opportunities and general commentary about personal property appraising. Visit often. Comments, news, suggestions and content contributions are always welcome.

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Todd W. Sigety, is a certified member of the International Society of Appraisers and is a partner in the Appraiser Workshop, developers of the Good, Better, "Best" Appraiser Workshop. He owns two Antique galleries in Old Town Alexandria, VA where the workshop is held. He currently serves as the President on the National Board of Directors for the International Society of Appraisers. He is also the creator and editor of the Journal of Advanced Appraisal Studies.

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